China. We assess that Beijing will continue actively targeting the US Government, its allies, and US companies for cyber espionage. Private-sector security experts continue to identify ongoing cyber activity from China, although at volumes significantly lower than before the bilateral Chinese-US cyber commitments of September 2015. Beijing has also selectively used offensive cyber operations against foreign targets that it probably believes threaten Chinese domestic stability or regime legitimacy.

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China Modernizing its Nuclear Forces

The Chinese People’s Liberation Army (PLA) has established a Rocket Force—replacing the longstanding Second Artillery Corps—and continues to modernize its nuclear missile force by adding more survivable road-mobile systems and enhancing its silo-based systems. This new generation of missiles is intended to ensure the viability of China’s strategic deterrent by providing a second-strike capability. In addition, the PLA Navy continues to develop the JL-2 submarine-launched ballistic missile (SLBM) and might produce additional JIN-class nuclear-powered ballistic missile submarines. The JIN- class submarines—armed with JL-2 SLBMs—will give the PLA Navy its first long-range, sea-based nuclear capability.

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SPACE AND COUNTERSPACE

Space

Global Trends. Continued global space industry expansion will further extend space-enabled capabilities and space situational awareness to nation-state, non-state, and commercial space actors in the coming years, enabled by increased availability of technology, private-sector investment, falling launch service costs, and growing international partnerships for shared production and operation. Government and commercial organizations will increasingly have access to space-derived information services such as imagery, weather, Internet, communications, and positioning, navigation, and timing (PNT) for intelligence, military, scientific, or business purposes. For instance, China aims to become a world leader in PNT as it completes its dual-use global satellite navigation system by 2020.

Military and Intelligence. Russia aims to improve intelligence collection, missile warning, and military communications systems to better support situational awareness and tactical weapons targeting. Russian plans to expand its imagery constellation and double or possibly triple the number of satellites by 2025.China intends to continue increasing its space-based military and intelligence capabilities to improve global situational awareness and support complex military operations. Many countries in the Middle East, Southeast Asia, and South America are purchasing dual-use imaging satellites to support strategic military activities, some as joint development projects.

Counterspace

Space Warfare.We assess that Russia and China perceive a need to offset any US military advantage derived from military, civil, or commercial space systems and are increasingly considering attacks against satellite systems as part of their future warfare doctrine. Both will continue to pursue a full range of anti-satellite (ASAT) weapons as a means to reduce US military effectiveness. In late 2015, China established a new service—the PLA Strategic Support Force—probably to improve oversight and command of Beijing’s growing military interests in space and cyberspace. Russia and China remain committed to developing capabilities to challenge perceived adversaries in space, especially the United States, while publicly and diplomatically promoting nonweaponization of space and “no first placement” of weapons in space. Such commitment continues despite ongoing US and allied diplomatic efforts to dissuade expansion of threats to the peaceful use of space, including international engagements through the UN.

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Counterspace Weapons. The global threat of electronic warfare (EW) attacks against space systems will expand in the coming years in both number and types of weapons. Development will very likely focus on jamming capabilities against dedicated military satellite communications (SATCOM), Synthetic Aperture Radar (SAR) imaging satellites, and enhanced capabilities against Global Navigation Satellite Systems (GNSS), such as the US Global Positioning System (GPS). Blending of EW and cyber-attack capabilities will likely expand in pursuit of sophisticated means to deny and degrade information networks. Chinese researchers have discussed methods to enhance robust jamming capabilities with new systems to jam commonly used frequencies. Russia intends to modernize its EW forces and field a new generation of EW weapons by 2020. Iran and North Korea are also enhancing their abilities to disrupt military communications and navigation.

Some new Russian and Chinese ASAT weapons, including destructive systems, will probably complete development in the next several years. Russian military strategists likely view counterspace weapons as an integral part of broader aerospace defense rearmament and are very likely pursuing a diverse suite of capabilities to affect satellites in all orbital regimes. Russian lawmakers have promoted military pursuit of ASAT missiles to strike low-Earth orbiting satellites, and Russia is testing such a weapon for eventual deployment. A Russian official also acknowledged development of an aircraft-launched missile capable of destroying satellites in low-Earth orbit. Ten years after China intercepted one of its own satellites in low-Earth orbit, its ground-launched ASAT missiles might be nearing operational service within the PLA. Both countries are advancing directed energy weapons technologies for the purpose of fielding ASAT systems that could blind or damage sensitive space-based optical sensors. Russia is developing an airborne laser weapon for use against US satellites. Russia and China continue to conduct sophisticated on-orbit satellite activities, such as rendezvous and proximity operations, at least some of which are likely intended to test dual-use technologies with inherent counterspace functionality. For instance, space robotic technology research for satellite servicing and debris-removal might be used to damage satellites. Such missions will pose a particular challenge in the future, complicating the US ability to characterize the space environment, decipher intent of space activity, and provide advance threat warning.

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COUNTERINTELLIGENCE

The United States will face a complex global foreign intelligence threat environment in 2017. We assess that the leading state intelligence threats to US interests will continue to be Russia and China, based on their services’ capabilities, intent, and broad operational scope.

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Macroeconomic Stability

The outlook for emerging markets and developing countries is improving, primarily because of stabilizing commodity prices and increased capital inflows. The IMF forecasts that growth in emerging economies will accelerate to 4.5 percent in 2017 as recoveries start to take hold in several countries. However, rising non-performing loans in China could reinforce the deceleration in Chinese economic growth, weighing on global economic and financial conditions and dampening global demand, particularly for commodities. Moreover, the prospect of higher interest rates in the United States and a strengthening dollar might lead to sustained capital outflows again from emerging markets.

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Environmental Risks and Climate Change

The trend toward a warming climate is forecast to continue in 2017. The UN World Meteorological Organization (WMO) is warning that 2017 is likely to be among the hottest years on record—although slightly less warm than 2016 as the strong El Nino conditions that influenced that year have abated.The US National Oceanic and Atmospheric Administration (NOAA) and the National Aeronautics and Space Administration (NASA) reported that 2016 was the hottest year since modern measurements began in 1880. This warming is projected to fuel more intense and frequent extreme weather events that will be distributed unequally in time and geography. Countries with large populations in coastal areas are particularly vulnerable to tropical weather events and storm surges, especially in Asia and Africa.

Global air pollution is worsening as more countries experience rapid industrialization, urbanization, forest burning, and agricultural waste incineration, according to the World Health Organization (WHO).An estimated 92 percent of the world’s population live in areas where WHO air quality standards are not met, according to 2014 information compiled by the WHO.People in low-income cities are most affected, with the most polluted cities located in the Middle East, Asia, and Africa. Public dissatisfaction with air quality might drive protests against authorities, such as those seen in recent years in China, India, and Iran.

Heightened tensions over shared water resources are likely in some regions. The dispute between Egypt and Ethiopia over the construction of the massive Grand Ethiopian Renaissance Dam (GERD) on the Nile is likely to intensify because Ethiopia plans to begin filling the reservoir in 2017.

Global biodiversity will likely continue to decline due to habitat loss, overexploitation, pollution, and invasive species, according to a study by a nongovernmental conservation organization, disrupting ecosystems that support life, including humans. Since 1970, vertebrate populations have declined an estimated 60 percent, according to the same study, whereas populations in freshwater systems declined

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more than 80 percent. The rate of species loss worldwide is estimated at 100 to 1,000 times higher than the natural background extinction rate, according to peer-reviewed scientific literature.

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REGIONAL THREATS

EAST ASIA

China

China will continue to pursue an active foreign policy—especially within the Asia Pacific region— highlighted by a firm stance on competing territorial claims in the East China Sea (ECS) and South China Sea (SCS), relations with Taiwan, and its pursuit of economic engagement across East Asia. Regional tension will persist as China completes construction at its expanded outposts in the SCSdespite an overwhelmingly strong ruling against it by a UN Convention on the Law of the Sea (UNCLOS) arbitral tribunal in July 2016. China will also pursue efforts aimed at fulfilling its ambitious “One Belt, One Road” initiative to expand China’s economic role and outreach across Asia through infrastructure projects.

China will seek to build on its hosting of the G20 Summit in Hangzhou in September 2016, its “One-Belt, One-Road” initiative, and progress on launching the Asia Infrastructure Investment Bank to increase its global presence on international economic issues.China will increasingly be a factor in global responses to emerging problems, as illustrated by China’s participation in UN peacekeeping operations, its expanding counterterrorism cooperation, and infrastructure constructionin Africa and Pakistan as part of the China-Pakistan Economic Corridor.

Domestically, Chinese leaders will move cautiously on their ambitious reform agenda, maintain their anti- corruption campaign, and try to manage China’s slowing economy. China’s economic growth continues to be driven by unsustainable debt accumulation, but Beijing has made limited progress on reforms needed to boost economic efficiencies.Debates among Chinese leaders over policy and personnel choices will intensify before the leadership transition at the 19th Party Congress in fall 2017when Chinese President Xi Jinping will begin his second term as the head of the Chinese Communist Party.

North Korea

North Korea’s weapons of mass destruction program, public threats, defiance of the international community, confrontational military posturing, cyber activities, and potential for internal instability pose a complex and increasingly grave national security threat to the United States and its interests.

North Korea’s unprecedented level of testing and displays of strategic weapons in 2016 indicate that Kim is intent on proving he has the capability to strike the US mainland with nuclear weapons. In 2016, the regime conducted two nuclear tests—including one that was claimed to be of a standardized warhead design—and an unprecedented number of missile launches, including a space launch that put a satellite into orbit. These ballistic missile tests probably shortened North Korea’s pathway toward a reliable ICBM, which largely uses the same technology. Kim was also photographed beside a nuclear warhead design and missile airframes to show that North Korea has warheads small enough to fit on a missile, examining a reentry-vehicle nosecone after a simulated reentry, and overseeing launches from a submarine and from mobile launchers in the field, purportedly simulating nuclear use in warfighting scenarios. North

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Korea is poised to conduct its first ICBM flight test in 2017 based on public comments that preparations to do so are almost complete and would serve as a milestone toward a more reliable threat to the US mainland. Pyongyang’s enshrinement of the possession of nuclear weapons in its constitution, while repeatedly stating that nuclear weapons are the basis for its survival, suggests that Kim does not intend to negotiate them away at any price.

North Korea has long posed a credible and evolving military threat to South Korea and, to a lesser extent, Japan. North Korea possesses a substantial number of proven mobile ballistic missiles, capable of striking a variety of targets in both countries, as demonstrated in successful launches in 2016. Kim has further expanded the regime’s conventional strike options in recent years, with more realistic training, artillery upgrades, and new close-range ballistic missiles that enable precision fire at ranges that can reach more US and allied targets in South Korea.

After five years in power, North Korean leader Kim Jong Un continues to defy international sanctions for his country’s behavior and reinforce his authority through purges, executions, and leadership shuffles, restricting fundamental freedoms, and enforcing controls on information. He notably unveiled new ruling structures in conjunction with the first Korean Workers Party Congress in a generation, held in May 2016.

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RUSSIA AND EURASIA

Russia

In 2017, Russia is likely to be more assertive in global affairs, more unpredictable in its approach to the United States, and more authoritarian in its approach to domestic politics. Emboldenedby Moscow’s ability to affect battlefield dynamics in Syria and by the emergence of populist and more pro-Russian governments in Europe, President VladimirPutin is likely to take proactive actions that advance Russia’s great power status.

Putin will seek to prevent any challenges to his rule in the runup to presidential elections scheduled for 2018. Putin remains popular at home, but low turnout in the Duma elections in 2016 and sustained economic hardship will probably enhance Putin’s concerns about his ability to maintain control. Putin is likely to continue to rely on repression, state control over media outlets, and harsh tactics to control the political elite and stifle public dissent.

Russia is likely to emerge from its two-year recession in 2017, but the prospects for a strong recovery are slim. Russia is likely to achieve 1.3 percent GDP growth in 2017 and 1.7 percent in 2018, according to commercial forecasts. Putin has long sought to avoid structural reforms that would weaken his control of the country and is unlikely to implement substantial reforms before the presidential elections.

We assess that Russia will continue to look to leverage its military support to the Asad regime to drive a political settlement process in Syria on its terms. Moscow has demonstrated that it can sustain a modest force at a high-operations tempo in a permissive, expeditionary setting while minimizing Russian casualties and economic costs. Moscow is also likely to use Russia’s military intervention in Syria, in conjunction with efforts to capitalize on fears of a growing ISIS and extremist threat, to expand its role in the Middle East.

We assess that Moscow’s strategic objectives in Ukraine—maintaining long-term influence over Kyiv and frustrating Ukraine’s attempts to integrate into Western institutions—will remain unchanged in 2017. Putin is likely to maintain pressure on Kyiv through multiple channels, including through Russia’s actions in eastern Ukraine, where Russia arms so-called “separatists. Moscow also seeks to undermine Ukraine’s fragile economic system and divided political situation to create opportunities to rebuild and consolidate Russian influence in Ukrainian decisionmaking.

Moscow will also seek to exploit Europe’s fissures and growing populist sentiment in an effort to thwart EU sanctions renewal, justify or at least obfuscate Russian actions in Ukraine and Syria, and weaken the attraction of Western integration for countries on Russia’s periphery. In particular, Russia is likely to sustain or increase its propaganda campaigns. Russia is likely to continue to financially and politically support populist and extremist parties to sow discord within European states and reduce popular support for the European Union.

The Kremlin is also likely to continue to see defense modernization as a top national priority even as the cumulative effect on the economy of low oil prices, sanctions, and systemic problems serves as a drag on key military goals. Moscow is pursuing a wide range of nuclear, conventional, and asymmetric

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capabilities designed to achieve qualitative parity with the United States. These capabilities will give Moscow more options to counter US forces and weapons systems.